Standing and Rule‑Applicability Challenges Under Texas APA § 2001.038:
Commentary on Kensington Title‑Nevada, LLC v. Texas Department of State Health Services

I. Introduction

The Supreme Court of Texas’s decision in Kensington Title‑Nevada, LLC v. Texas Department of State Health Services, No. 23‑0644 (Tex. Mar. 28, 2025), is a significant development in Texas administrative law. The Court clarifies:

When a private party has standing to bring a declaratory-judgment action under Texas Government Code § 2001.038 (the Texas Administrative Procedure Act’s rule-challenge provision); and
What kinds of “rule‑applicability” claims fall within the statute’s waiver of sovereign immunity.

The case arises from an unusual and difficult fact pattern: a landowner acquired real property that contained abandoned radioactive materials owned by someone else. The regulatory agency—the Texas Department of State Health Services (DSHS)—sought to penalize the landowner under a licensing rule prohibiting possession of radioactive materials without a license. At the same time, local taxing authorities threatened the landowner with theft claims if it removed the very equipment that DSHS insisted it must decommission.

Caught between conflicting government demands, Kensington brought a declaratory-judgment action under § 2001.038, arguing that the radioactive-materials licensing rule did not apply to it at all. The core legal questions were:

Does Kensington have standing to seek a declaration that the rule does not apply to it, where the agency is already pursuing an enforcement action and penalty?
Is Kensington’s challenge a permissible “applicability” challenge under § 2001.038, or is it an impermissible attack on the agency’s particular enforcement decision?

The Court answers both questions in the landowner’s favor. In doing so, it rejects a restrictive line of court-of-appeals decisions drawing a sharp jurisdictional distinction between “applicability of” and “application of” a rule, and it confirms that district courts may decide factual disputes relevant to such rule-applicability challenges without requiring prior agency adjudication.

II. Summary of the Opinion

Justice Busby, writing for a unanimous Court, reverses the Third Court of Appeals and reinstates the trial court’s jurisdiction over Kensington’s § 2001.038 suit, remanding for a decision on the merits.

The key holdings are:

Standing. Kensington has constitutional standing. The Department’s notice seeking an $8,000 administrative penalty is a classic threatened monetary injury, and a declaration that the licensing rule does not apply to Kensington would redress that injury.
Scope of § 2001.038’s immunity waiver. Section 2001.038 expressly waives sovereign immunity for declaratory actions challenging “the validity or applicability of a rule.” At minimum, this includes suits in which:
- a plaintiff alleges that an agency rule does not apply to that plaintiff at all; and
- the rule’s threatened application interferes with the plaintiff’s rights or privileges.
Kensington’s petition fits squarely within this category. It asks whether the radioactive-materials licensing rule can be applied to an owner of real property on which another entity’s radioactive property has been abandoned.
Rejection of the court of appeals’ narrow reading. The Supreme Court holds that the court of appeals erred by:
- conflating the jurisdictional question (is this an “applicability” challenge?) with the merits (does the rule, properly interpreted, in fact apply?); and
- requiring that the plaintiff show the rule is irrelevant to anyone in the factual situation, rather than focusing on whether it threatens to interfere with the plaintiff’s rights.
No exhaustion requirement and trial-court fact-finding. Section 2001.038(d) authorizes courts to decide such challenges “without regard to” whether the agency has first ruled on applicability, and the recent addition of § 2001.038(f) confirms that trial courts may resolve factual disputes necessary to determine rule applicability. Doctrines like primary jurisdiction and exhaustion therefore cannot be used to strip courts of jurisdiction over such suits.

The Court stops short of comprehensively defining the outer boundary between permissible “applicability” challenges and impermissible efforts simply to overturn a particular enforcement decision. But it firmly holds that Kensington’s challenge—seeking a declaration whether the licensing rule applies to the landowner at all—is within the heartland of § 2001.038.

III. Factual and Procedural Background

A. The radioactive-materials facility

Kensington Title‑Nevada, LLC is a Nevada-based real estate company. In December 2018, it acquired real estate in Denton, Texas, by foreclosing on a lien granted by the prior owners, NuView Life Sciences, Inc. and NuView Molecular Pharmaceuticals, Inc.

On the property sat radioactive business personal property owned by US Radiopharmaceuticals, Inc. (USR). The equipment included a linear accelerator and a cyclotron, used to produce medical radioisotopes. Operations had ceased in 2009 due to financial troubles and unpaid taxes.

Earlier in 2018, DSHS had:

denied USR’s application to renew or obtain a radioactive materials license; and
ordered USR to begin decommissioning and properly disposing of the radioactive material.

B. Kensington’s attempts to manage the problem

Before foreclosing, Kensington warned DSHS that it expected USR might abandon the radioactive material. Kensington:

asked DSHS to accept possession of the radioactive materials to complete decommissioning; the agency refused;
proposed an alternative decommissioning plan under which Kensington would pay a DSHS‑licensed contractor to remove the materials; and
obtained DSHS approval of that plan, and DSHS issued a license to the contractor for cleanup.

Importantly:

the contractor—not Kensington—held the license and had a key to access the radioactive materials; and
DSHS declined to provide Kensington with access to the radioactive-materials area.

Kensington did, however, hire a caretaker to secure the real property and later arranged a tour of the property. There was no evidence that anyone without the requisite license accessed the radioactive materials during that tour.

C. Conflicting demands from different government actors

Meanwhile, the City of Denton, Denton County, and Denton ISD were suing USR over unpaid taxes on the radioactive business personal property. In April 2019, they added Kensington as a party. In July, they obtained a judgment against USR, authorizing sale of USR’s personal property to satisfy the tax liens.

Rather than immediately enforcing their liens, these taxing entities allegedly:

threatened to sue Kensington for theft if its contractor continued to remove USR’s business personal property.

The contractor halted decommissioning before completion. As a result, Kensington was left with unusable land burdened by abandoned radioactive materials and inconsistent demands from different governmental actors.

D. DSHS enforcement and the licensing rule

In October 2020, DSHS sent Kensington a Notice of Violation for allegedly breaching 25 Tex. Admin. Code § 289.252(a)(2), which provides (in relevant part):

“Unless otherwise exempted, no person shall manufacture, produce, receive, possess, use, transfer, own, or acquire radioactive material except as authorized by … a specific license.”

DSHS alleged that:

Kensington had “taken possession” of the radioactive materials;
had failed to complete decommissioning in a timely manner; and
lacked the required license.

DSHS sought an $8,000 administrative penalty. The effect was to present Kensington with a dilemma:

If Kensington continued decommissioning material it did not own, it risked being sued by the taxing entities for theft of the liened personal property.
If it stopped decommissioning, it faced regulatory penalties for unlicensed “possession” of the same material.

E. The contested case and parallel § 2001.038 suit

The Notice of Violation was referred to the State Office of Administrative Hearings (SOAH) for a contested-case hearing. The ALJ concluded that Kensington “possessed” the radioactive materials in violation of the rule because it:

“exercised dominion” and “actual control” by hiring and paying a licensed contractor to prepare and implement a decommissioning plan; and
“controlled access” by hiring a caretaker and arranging a tour of the real property.

The ALJ recommended a $7,000 penalty, which DSHS adopted in a final order. Kensington sought judicial review; that proceeding was later abated.

In parallel, Kensington pursued a declaratory-judgment claim under Texas Government Code § 2001.038, initially by amending its pleading in the existing Denton County tax suit and then, after severance, in Travis County. Kensington sought declarations that:

DSHS may not treat owners of real property as “possessors” or “accidental licensees” solely because radioactive materials have been abandoned on their land; and
DSHS’s licensing rules do not apply to such owners of real property (including Kensington).

DSHS filed a plea to the jurisdiction, arguing:

Kensington lacked standing; and
the suit was not a proper “applicability” challenge under § 2001.038 but an improper attack on how the agency applied its rule to a specific enforcement dispute.

The trial court denied the plea. The Third Court of Appeals reversed, holding that Kensington’s petition did not properly challenge rule “applicability” but only how the rule had been applied to Kensington’s particular facts, and thus fell outside § 2001.038’s waiver of immunity. The Supreme Court granted review and reversed.

IV. Standing Under § 2001.038(a)

A. General standing principles

The Court begins with well-established Texas standing doctrine:

State Bar of Texas v. Gomez, 891 S.W.2d 243 (Tex. 1994), and Texas Ass’n of Business v. Texas Air Control Board, 852 S.W.2d 440 (Tex. 1993), emphasize that standing, a live controversy, and justiciability are prerequisites to subject‑matter jurisdiction.
Heckman v. Williamson County, 369 S.W.3d 137 (Tex. 2012), reiterates that constitutional standing requires:
1. a concrete and particularized injury-in-fact;
2. fair traceability to the defendant’s conduct; and
3. likely redressability by the requested relief.

Section 2001.038(a) overlays these constitutional requirements with a statute-specific standing standard: a plaintiff may sue to determine the “validity or applicability” of a rule if it alleges that “the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff.”

B. Injury-in-fact and traceability

The Court has little difficulty finding injury and traceability. Kensington alleged that:

it “has never been a licensee” and “never taken possession of radioactive material in any way,” yet
DSHS nonetheless “seeks an administrative penalty against Kensington in the amount of $8,000.”

Threatened monetary loss is, as the Court notes (quoting Collins v. Yellen, 594 U.S. 220 (2021)), a “prototypical form of injury in fact.” The Court cites its own recent decision in Mosaic Baybrook One, L.P. v. Simien, 674 S.W.3d 234 (Tex. 2023), which similarly treated financial harm as sufficient to satisfy the injury requirement.

The threatened penalty is directly traceable to DSHS’s position that the licensing rule applies to Kensington as an unlicensed possessor of radioactive materials.

C. Redressability and the Department’s objection

DSHS framed its redressability argument narrowly: even if Kensington obtained the requested declarations, the agency contended, those declarations would not necessarily negate the ALJ’s specific factual finding that Kensington “possessed” the materials through control and dominion. In other words, DSHS contended that because Kensington’s challenge was not perfectly aligned with the factual and legal grounds of the ALJ’s enforcement decision, a declaration would not actually eliminate the penalty.

The Court rejects this cramped view of redressability. It emphasizes several points:

Nature of the requested relief. Kensington sought a declaration that the licensing rule “does not apply to” it because it does not own or possess the radioactive materials. If granted, this would negate the legal premise of DSHS’s effort to penalize Kensington for unlicensed possession.
Timing and independence from the administrative record. Section 2001.038 expressly authorizes a court to render declaratory judgment “without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule in question.” Thus, redressability does not depend on the details of an ALJ’s later findings in a separate contested case.
Merits vs. jurisdiction. The Court stresses that whether Kensington has correctly characterized its claim as an applicability challenge goes to the merits, not jurisdiction. Citing Pike v. Texas EMC Management, LLC, 610 S.W.3d 763 (Tex. 2020), the Court reiterates that courts must not “jurisdictionalize” merits disputes under the guise of standing analysis.

From a doctrinal standpoint, the Court’s message is clear: if a plaintiff faces a concrete, imminent injury from an agency’s asserted application of a rule, and a declaration that the rule does not apply (or is invalid) would alleviate or prevent that harm, the redressability requirement is satisfied. Fine-grained disputes about how exactly the agency applied the rule belong on the merits, not in the jurisdictional inquiry.

V. Sovereign Immunity and the Scope of “Rule‑Applicability” Challenges

A. The statutory waiver: § 2001.038

Sovereign immunity generally bars suits against the State absent an express waiver. Citing Texas Department of Transportation v. Sefzik, 355 S.W.3d 618 (Tex. 2011), and Wichita Falls State Hospital v. Taylor, 106 S.W.3d 692 (Tex. 2003), the Court emphasizes that waivers are strictly construed but, once identified, must be given effect as written.

Section 2001.038 provides such a waiver. It states, in relevant part:

The “validity or applicability” of a rule may be determined in an action for declaratory judgment if the rule or its threatened application interferes with a legal right or privilege of the plaintiff. § 2001.038(a).
The state agency that adopted the rule “must be made a party” to the action. § 2001.038(c).
The court may render a declaratory judgment “without regard to whether the plaintiff requested the state agency to rule on the validity or applicability of the rule in question.” § 2001.038(d).
The Legislature has recently added § 2001.038(f), authorizing the Fifteenth Court of Appeals to direct trial courts to hold evidentiary hearings on such challenges.

These provisions work together to create a direct, judicial route for pre‑enforcement (or parallel) attacks on a rule’s validity or applicability, bypassing the usual requirement that issues be exhausted in an administrative contested case.

B. The court of appeals’ “applicability vs. application” distinction

The Third Court of Appeals, in this and several prior decisions, attempted to narrow § 2001.038’s scope by distinguishing:

“Applicability” of a rule – whether the rule is “capable of” being applied to a given “factual situation” in some way.
“Application” of a rule – how the agency has interpreted and enforced the rule against a specific party on specific facts.

On this view, a plaintiff could only invoke § 2001.038 if it challenged the rule’s relevance to the general type of situation at issue; if the plaintiff conceded that the rule could apply in principle but argued it had been wrongly applied to it in practice, the suit would be dismissed for lack of jurisdiction as an attack on “application,” not “applicability.”

This is how the court of appeals disposed of Kensington’s action. The court re‑framed the factual situation at a high level of abstraction (“possession of radioactive personal property by an entity that lacks a proper license”) and held that, because Kensington did not dispute that the rule could apply to some entity in that situation, it had failed to plead a proper “applicability” challenge.

C. The Supreme Court’s textual response

The Supreme Court rejects this approach as inconsistent with the statutory text.

First, the Court notes that § 2001.038(a) itself ties “applicability” to “actual or threatened application” of a rule. The statute expressly authorizes an action when “the rule or its threatened application” interferes with the plaintiff’s rights. The terms “applicability” and “application” are thus used interchangeably in the statute, undermining the notion that they mark a rigid jurisdictional boundary.

Second, the Court recasts the inquiry in terms more intuitive (and faithful to the text):

Claims within § 2001.038’s scope include those that ask whether a rule applies to the plaintiff at all; and
Claims outside the scope (or at least beyond the statute’s clear core) are those that merely dispute how the rule should be applied, i.e., whether the agency got the outcome right under a rule that concededly governs the plaintiff.

Crucially, the Court does not fully adopt or fully reject the “whether vs. how” distinction; it says only that:

at a minimum, § 2001.038 covers suits seeking a declaration whether the rule applies to the plaintiff; and
some applicability suits may unavoidably “yield guidance on how the rule would apply or the outcome of its application,” without stepping outside § 2001.038’s waiver.

Beyond that, the Court “express[es] no view” on the outer boundary of permissible relief under § 2001.038(a). That question remains open for future cases.

D. Model Act and other states’ experience

To frame the issue, the Court notes that § 2001.038’s language closely tracks § 7 of the 1961 Model State Administrative Procedure Act. All fifty states have some form of rule-challenge mechanism; twenty‑one, like Texas, expressly allow review of both validity and applicability.

Remarkably, only one other state—Arkansas—has explicitly embraced the same “applicability vs. application” dichotomy. In Arkansas Department of Finance & Administration v. Naturalis Health, LLC, 549 S.W.3d 901 (Ark. 2018), the Arkansas Supreme Court, relying on dictionary definitions, held that “applicability” and “application” are distinct, and used that distinction to restrict rule-challenge jurisdiction.

The Texas Supreme Court, however, implicitly distances itself from that reasoning. It underscores that Texas’s statute links applicability to “application” and that a more restrictive, dictionary-driven split is not justified where the Legislature itself uses the terms in close proximity and without any clear effort to distinguish them.

E. Application to Kensington’s pleadings

Under the Court’s clarified standard, Kensington’s claim easily qualifies as an applicability challenge.

Kensington sought declarations that:

DSHS “may not attempt to force owners of real property to accept liability for radioactive materials abandoned on their real property” or treat them as “possessors” of such materials;
the radioactive-materials licensing rules “do not apply” to such owners of real property; and
DSHS “may not create ‘accidental licensees’” in that manner and exceeds its authority when asserting that its rules apply to Kensington.

Those allegations present precisely the sort of controversy § 2001.038 was designed to resolve: a party facing enforcement under an administrative rule denies that the rule governs it at all under the alleged facts. That is a challenge to the rule’s “applicability to [the plaintiff],” not merely dissatisfaction with “how” the rule was enforced in a particular case.

The Third Court of Appeals’ re‑framing—focusing on “possession of radioactive personal property by an entity that lacks a proper license”—misstates the relevant inquiry. The Supreme Court emphasizes that the critical disputed question is whether Kensington is properly characterized as such an “entity,” i.e., whether Kensington in fact “possessed” the radioactive materials within the meaning of the rule.

To say that the rule “applies” simply because “unlicensed possession” occurred is to assume the very issue in dispute (whether Kensington possessed the material) and then use that assumption to strip the court of jurisdiction. That is circular and improperly conflates jurisdictional and merits questions.

F. Rejection of primary jurisdiction and exhaustion defenses

Both DSHS and the court of appeals suggested that disputes about who “possesses” radioactive materials—and similar fact-bound questions—are better resolved in the administrative process, subject to later judicial review. They invoked the notions of:

Primary jurisdiction – the idea that courts should defer to agencies’ special expertise on certain issues; and
Exhaustion of administrative remedies – the requirement that a regulated party pursue agency procedures before seeking judicial intervention.

The Supreme Court holds that this line of reasoning is foreclosed by the statute’s text:

Section 2001.038(d) explicitly authorizes courts to resolve validity or applicability challenges “without regard to whether the plaintiff requested the state agency to rule” on those questions. That is a legislative rejection of any exhaustion requirement for these particular suits.
The recent addition of § 2001.038(f), which empowers the Fifteenth Court of Appeals to direct trial courts to conduct evidentiary hearings, presupposes that trial courts are not only permitted but expected to resolve factual disputes in these actions.

Together, these provisions reflect the Legislature’s policy choice: when a party challenges a rule’s validity or applicability under § 2001.038, the district court—not the agency—is the primary decision-maker, including with respect to fact disputes connected to that challenge. Agencies cannot invoke their expertise as a jurisdictional shield to block such suits.

VI. Precedents and Authorities Cited: How They Shaped the Decision

A. Texas standing and jurisdiction cases

State Bar of Texas v. Gomez, 891 S.W.2d 243 (Tex. 1994); Texas Ass’n of Business v. Texas Air Control Board, 852 S.W.2d 440 (Tex. 1993) – Establish the foundational rule that standing, justiciability, and a live controversy are components of subject-matter jurisdiction. The Court uses these as the starting point for analyzing Kensington’s standing.
Heckman v. Williamson County, 369 S.W.3d 137 (Tex. 2012) – Supplies the modern Texas test for Article I standing: injury, traceability, and redressability. Kensington’s situation easily fits that framework, particularly after Mosaic Baybrook.
Mosaic Baybrook One, L.P. v. Simien, 674 S.W.3d 234 (Tex. 2023) (citing Collins v. Yellen, 594 U.S. 220 (2021)) – Reinforces that threatened financial loss is a classic injury-in-fact. This allows the Court to treat the threatened penalty as sufficient injury without extensive analysis.
Pike v. Texas EMC Management, LLC, 610 S.W.3d 763 (Tex. 2020) – Emphasizes the need to avoid conflating merits questions with jurisdiction. The Court applies that principle here to hold that whether Kensington’s claim is properly characterized as a rule-applicability challenge goes to the merits, not to standing or jurisdiction.

B. Sovereign immunity and waivers

Texas Department of Transportation v. Sefzik, 355 S.W.3d 618 (Tex. 2011) – Confirms that sovereign immunity bars suits against the State unless there is an express legislative waiver. Sefzik underscores the need to interpret § 2001.038 as a waiver, but within its textual bounds.
City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) – Discusses the ultra vires exception and how sovereign immunity interacts with suits seeking prospective relief against state actors. The Court cites Heinrich in passing, mainly to situate § 2001.038 within the broader immunity framework.
Wichita Falls State Hospital v. Taylor, 106 S.W.3d 692 (Tex. 2003) – Illustrates how statutory schemes can waive immunity for particular types of claims. The Court analogizes § 2001.038 to those types of targeted waivers.

C. Third Court of Appeals decisions on § 2001.038

LMV‑AL Ventures, LLC v. Texas Department of Aging & Disability Services, 520 S.W.3d 113 (Tex. App.—Austin 2017, pet. denied) – A memory-care facility sought a declaratory judgment that its rooms met rule-specified size requirements for double occupancy. The Third Court of Appeals held that was not a proper “applicability” challenge but instead an effort to control the agency’s application of the rule to specific facts. That decision laid groundwork for the restrictive interpretation rejected in Kensington.
Texas Alcoholic Beverage Commission v. D. Houston, Inc., No. 03‑13‑00327‑CV, 2017 WL 2333272 (Tex. App.—Austin May 25, 2017, pet. denied) (mem. op.) – Another Third Court of Appeals case distinguishing “applicability” challenges from fact-specific “application” disputes, likewise limiting § 2001.038 jurisdiction.

The Supreme Court acknowledges that LMV‑AL Ventures correctly recognized, at least, that § 2001.038 must cover suits seeking a declaration whether a rule applies to the plaintiff. But Kensington disapproves of the lower court’s more aggressive move: narrowing “applicability” to situations where the rule is wholly irrelevant to the factual scenario at issue and declining jurisdiction whenever the rule might apply to someone.

D. Comparative authority: Arkansas and the Model Act

1961 Model State Administrative Procedure Act, § 7 – The source of the “validity or applicability” rule-challenge language that Texas adopted. The Court invokes the Model Act mainly to reinforce that Texas’s wording is standard and that the Legislature likely intended the sort of direct rule-challenge procedure adopted elsewhere.
Arkansas Department of Finance & Administration v. Naturalis Health, LLC, 549 S.W.3d 901 (Ark. 2018) – An example of another state construing similar language in a narrow way, sharply distinguishing “applicability” (whether the rule should be applied at all) from “application” (how it was applied). The Texas Supreme Court notes that Arkansas is an outlier among states with Model Act-like provisions and declines to follow that path.

E. New Fifteenth Court of Appeals

Dallas Area Rapid Transit v. Amalgamated Transit Union Local No. 1338, 273 S.W.3d 659 (Tex. 2008) – Establishes that one court of appeals is not bound by the precedents of another. The Court cites this in explaining that the newly created Fifteenth Court of Appeals, which will hear future § 2001.038 appeals, will not be bound by the Third Court of Appeals’ now-repudiated “applicability vs. application” line.

VII. Complex Concepts Simplified

Although the audience for this decision is largely legal professionals, Kensington engages several administrative-law concepts that can be opaque. The following brief explanations may aid understanding.

1. Sovereign immunity

“Sovereign immunity” is the doctrine that the State (and its agencies) cannot be sued unless the Legislature has clearly said they can. It protects public funds and preserves separation of powers by making courts wait for legislative permission before entertaining certain claims.

A statute like § 2001.038, which says “the validity or applicability of a rule may be determined in an action for declaratory judgment” and requires that the agency “be made a party,” is such a permission slip—an express waiver of immunity for that category of lawsuit.

2. Declaratory-judgment actions

A declaratory judgment is a court order that clarifies the parties’ rights and obligations without necessarily awarding damages or other coercive relief. In the § 2001.038 context, the plaintiff asks the court to declare, in advance (or in parallel with enforcement), whether:

a rule is valid (properly adopted, within the agency’s legal authority, consistent with statutes and the constitution) and/or
a rule is applicable (legally reaches the plaintiff’s circumstances).

This allows parties to head off, or at least reshape, enforcement actions before they have fully run their course.

3. “Validity” vs. “applicability” of a rule

Validity challenge: “This rule is unlawful as written”—for example, because it exceeds statutory authority, was not adopted following required procedures, or conflicts with higher law.
Applicability challenge: “Even if the rule is valid in general, it does not apply to me or to my situation”—for example, because:
- the statutory delegation doesn’t cover this category of actor;
- the rule’s text, properly interpreted, doesn’t reach these facts; or
- applying it to the plaintiff in this way would be beyond what the Legislature authorized.

Kensington involves only the second type: an argument that the radioactive-materials licensing rule does not apply to a landowner that neither owns nor possesses the radioactive equipment, even if the rule is otherwise valid.

4. Contested cases vs. § 2001.038 suits

A contested case is a formal, trial-type administrative proceeding (often at SOAH) where:

the agency accuses a specific party of violating a rule or statute;
evidence is taken, witnesses testify, and an ALJ or agency panel makes findings; and
the agency then issues a final order, which can be appealed to court under the substantial-evidence standard.

By contrast, a § 2001.038 suit:

is filed directly in district court;
targets the text of a rule and its legal reach, rather than just an individual enforcement decision; and
does not require the plaintiff to have gone through an agency process first.

The Legislature and the Court have accepted that these two tracks can proceed in parallel, as happened in Kensington. The agency’s enforcement case does not preclude, or subsume, the district court’s authority to decide whether the rule actually applies to the plaintiff.

5. Primary jurisdiction and exhaustion

These related doctrines usually require courts to give agencies the first opportunity to address technical or policy-laden issues:

Primary jurisdiction – even when a court has jurisdiction, it may defer to the agency’s initial determination of a matter within the agency’s special competence.
Exhaustion – parties must pursue all available administrative remedies before asking a court for review.

In § 2001.038 actions, however, the Legislature has overridden these doctrines by:

explicitly authorizing courts to act “without regard to” prior agency rulings on rule validity or applicability; and
designing a process where factual disputes can be resolved by trial courts.

Kensington enforces that legislative choice: courts may not use primary jurisdiction or exhaustion as a jurisdictional barrier to rule-challenge suits under § 2001.038.

6. “Accidental licensees” and “possessors”

Kensington’s pleadings use the terms “accidental licensees” and “possessors” to describe its concern that DSHS is effectively turning innocent landowners into regulated licensees, simply because licensed entities have abandoned hazardous materials on their land.

The concern is that the agency’s interpretation of “possess” might:

extend licensing obligations far beyond entities that actually own or control radioactive materials; and
discourage landowners from cooperating in cleanup or remediation, for fear of being branded “possessors” and saddled with regulatory obligations.

The Supreme Court does not decide whether Kensington is or is not a “possessor” under the rule—that is the merits question for remand—but it holds that Kensington is entitled to have a court answer that question in a § 2001.038 action.

VIII. Practical and Doctrinal Impact

A. For regulated entities and landowners

Kensington materially strengthens the position of regulated parties in Texas facing uncertain or expansive agency interpretations of administrative rules. Key takeaways:

Pre‑enforcement and parallel challenges are viable. Parties need not wait for a final agency order, nor limit themselves to the confines of substantial‑evidence review, before asking a court to decide whether a rule applies to them. If an agency’s asserted application of a rule threatens fines or other legal harm, a § 2001.038 action is available.
Rule applicability is a judicial question. Agencies cannot transform a coverage dispute (“does the rule reach me?”) into a jurisdictional one by labeling it a question of “application” or by insisting on deference to their expertise. The statute grants courts the final say.
Fact disputes do not defeat jurisdiction. The existence of contested facts—such as whether a landowner “possessed” hazardous materials—does not mean the case belongs exclusively in agency proceedings. Trial courts can and must resolve such disputes in § 2001.038 suits.
Strategic options increase. Lawyers representing regulated entities can consider filing § 2001.038 actions when:
- the agency is asserting a novel or aggressive interpretation of a rule;
- the client disputes that the rule applies to it at all; and
- significant penalties or collateral consequences loom.

B. For state agencies

For agencies, Kensington is a cautionary decision:

Limited immunity defenses. Agencies can no longer rely on the “applicability vs. application” distinction, as articulated by the Third Court of Appeals, to knock out many § 2001.038 suits at the threshold. Sovereign immunity is waived for applicability challenges that ask whether the rule covers the plaintiff, even when that issue overlaps significantly with enforcement facts.
Expectation of judicial scrutiny. When an agency adopts a broad or creative interpretation of a rule, particularly one that expands its reach to new categories of actors (e.g., landowners deemed “possessors”), it should expect direct judicial scrutiny via § 2001.038. This may encourage more careful rule drafting and clearer guidance about who is regulated.
Parallel proceedings. Agencies must manage the practical realities of parallel contested cases and § 2001.038 suits. Outcomes in one forum may influence or constrain positions in the other, and agencies will need litigation strategies that account for both.

C. For Texas courts and the new Fifteenth Court of Appeals

The Legislature has assigned future § 2001.038 appeals to the Fifteenth Court of Appeals. Kensington:

gives that new court a clear directive: § 2001.038 is to be read broadly enough to encompass disputes over whether a rule applies to a plaintiff, even if those disputes overlap with fact questions; and
frees the Fifteenth Court from the Third Court’s restrictive line of cases, signaling that textual fidelity, rather than the applicability/application dichotomy, should guide its analysis.

At the trial-court level, judges can confidently:

deny pleas to the jurisdiction premised solely on the argument that a plaintiff is really complaining about the “application” of a rule; and
proceed to fact-finding and merits determinations on rule applicability, as the Legislature envisaged in § 2001.038(f).

D. Substantive administrative law: limits on agency expansion of rules

Substantively, Kensington is an important check on agency attempts to expand rule coverage through interpretation rather than rulemaking. While the Court does not hold that DSHS’s interpretation is invalid or improper, it reinforces the principle that:

questions about the reach of an existing rule—especially when they would impose significant new burdens on parties not clearly covered by the rule’s plain language—are matters for courts to decide; and
rule “applicability” disputes are not merely technical application issues but can implicate separation-of-powers and non-delegation concerns if agencies extend rules beyond statutory authority.

In short, § 2001.038, as construed in Kensington, is an important vehicle for maintaining the balance between legislative policy choices, agency implementation, and judicial review.

IX. Conclusion

Kensington Title‑Nevada, LLC v. Texas Department of State Health Services is a pivotal decision in Texas administrative law. It establishes that:

a plaintiff threatened with an administrative penalty has standing to challenge the applicability of an agency rule under § 2001.038;
the statute’s waiver of sovereign immunity extends, at a minimum, to suits asking whether a rule applies at all to the plaintiff, even when the rule might apply to others;
courts must not collapse jurisdictional analysis into the merits by assuming the correctness of the agency’s characterization of the facts or the rule’s reach; and
trial courts, not agencies, are the primary fora for resolving factual disputes relevant to rule validity and applicability in § 2001.038 actions, without any requirement to exhaust administrative remedies.

By rejecting the rigid “applicability vs. application” distinction previously employed by the Third Court of Appeals and by emphasizing the text of § 2001.038 and its roots in the Model State Administrative Procedure Act, the Supreme Court reaffirms the central role of the judiciary in policing the boundaries of agency power. Regulated parties now have a more secure and clearly defined avenue to contest aggressive, novel, or expansive interpretations of agency rules before or alongside enforcement, ensuring that questions of who is regulated, and how far agency rules truly reach, remain subject to independent judicial judgment.

Standing and Rule‑Applicability Challenges Under Texas APA § 2001.038: Commentary on Kensington Title‑Nevada, LLC v. Texas Department of State Health Services